to be honest i rather like it the way it is now - i just remember those fights in rome total war / medieval tw where a fight was over after a few seconds if the opponent did not manage to get his army in formation in time.

i agree that it would be more realistic, tactical more interesting and nice to have some units survive if you lose, but having those fights in the rome game in mind, i really would not like it to become a big factor in those battles.

if i choose to fight a big pvp battle, i do not want it to end after 5-10mins

Morale is a good idea. Let us not forget that economy and leadership mainly influence the morale of an army not engaged in war. Rulers could for instance organize games / fun fairs. I like how morale from this side was implemented in an old strategy game - Centurion - through games at the colloseum (arena fights / chariot races). Dawn of Fantasy could gain this aspect of game someday in the future. Arena could be the place where all players meet and fight with their Avatars or something along these lines. I'm in favor of everything that doesn't have negative effect on dynamics of combat.

Have only one problem with this idea why are the huge green brutes who love to fight have the lowest morale but the peace loving flower tending unicorn keepers have the highest? Goblins I can see having the lowest as they are small and weak but the idea of the guys who fight at any chance they get getting scared in combat the easyest doesnt sit right with me lol.

I'd give it a system which depends on how the battle is going raises or lowers moral. Elfs don't want to fight to begin with loving all life forms so should have low morale at start but they fight harder the more damage they take.

Orcs love to fight and outnumber the enemy so should have high morale when around their own units but break easy when outnumbered or far from the others.